Overview of the EUR/USD pair. June 13th. The logical euro calmly awaits a resolution
June 13, 2023 6:23 am
The EUR/USD currency pair again showed low volatility on Monday, which is fully consistent with the fundamental and macroeconomic backdrop of the day. It is worth noting that no planned events, not even minor ones, were scheduled for Monday, let alone important ones. Therefore, traders had nothing to react to, and later this week, a series of important events will take place, so it is necessary to conserve energy and not risk unnecessarily. From a technical point of view, the pair continues to correct after a month-long decline, with the CCI indicator entering oversold territory. The correction could be stronger, again fully corresponding to the overall technical picture. We haven’t said this for long, but now the EUR/USD pair trades are completely justified and logical. We can only hope that it will continue like this.
As mentioned earlier, there will be several important events this week. In particular, today, the report on US inflation will be published. At this point, it is difficult to say whether its value will be considered by the Federal Reserve’s monetary committee, which will already be holding a meeting at that time. The decision on the interest rate has already been made. No matter what anyone says, we do not believe the decision is made on the meeting day.
Usually, several weeks before the meeting, it becomes clear what decision will ultimately be made. For example, we initially started receiving “hawkish” information from Fed officials. But later, it shifted to “moderate.” As a result, according to the FedWatch tool, the probability of tightening monetary policy in June is minimal, and a whole group of Fed officials supports raising the rate once every two meetings. Therefore, according to popular opinion, the rate will remain unchanged on Wednesday, and in July, it will increase by 0.25% again. From our point of view, this will be an “additional increase” that the market did not initially expect. Therefore, the dollar should continue to experience optimism. The same goes for the euro. With the pound, everything is turned upside down.
ECB and Fed meetings may not affect market sentiment
We should also remember that the ECB meeting will take place this week. However, it is currently very difficult to expect anything extraordinary from it. The interest rate will increase by 0.25% with a probability of 99%, which the market has long anticipated, as this decision has been known for several months. Thus, the ECB’s rate plan remains unchanged: two more increases of 0.25%, and that’s it. Several factors support this scenario.
First, after reducing the pace of tightening to a minimum, there is expected to be a maximum of three increases; otherwise, the purpose of slowing down is lost. If inflation is high and tends to rise, why slow down the pace of tightening if you intend to complete only part of the cycle? Second, during the mortgage crisis of 2007-2008, the ECB raised its rate below the Federal Reserve and the Bank of England. Third, the ECB is forced to consider the interests of 27 countries, so it physically cannot afford any tightening of monetary policy that would put pressure on weak economies. In contrast, economies with low inflation will fall into deflation. The ECB has to balance the interests of all countries, which means an average peak rate. Therefore, the level of 4.25% seems the most realistic. And, as mentioned before, the market has already factored it in.
Therefore, there are no grounds for the euro to rise. It needs to pray that the economy of the Eurozone does not slide into a recession because its growth has been practically zero for two consecutive quarters. The dollar has many more advantages: a higher rate, a stronger economy, additional tightening, and a strong oversold condition. Therefore, we expect the pair to resume its decline in the medium term.
The average volatility of the euro/dollar currency pair over the past five trading days as of June 13 is 68 pips and is characterized as “average.” Thus, we expect the pair to move between the levels of 1.0686 and 1.0822 on Tuesday. A reversal of the Heiken Ashi indicator back down will indicate a possible resumption of the downward movement.
Nearest support levels:
S1 – 1.0742
S2 – 1.0681
S3 – 1.0620
Nearest resistance levels:
R1 – 1.0803
R2 – 1.0864
R3 – 1.0925
Trading recommendations:
The EUR/USD pair stays above the moving average line, but its presence in this area may be short-lived. Currently, long positions should be considered with targets at 1.0803 and 1.0822 as long as the price remains above the moving average. Short positions will become relevant only after the price moves below the moving average line, with targets at 1.0686 and 1.0681.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both channels are directed in the same direction, it indicates a strong trend.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – probable price channel within which the pair will move in the next 24 hours, based on current volatility indicators.
CCI indicator – its entry into the oversold area (below -250) or overbought area (above +250) indicates an approaching trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
The EUR/USD currency pair again showed low volatility on Monday, which is fully consistent with the fundamental and macroeconomic backdrop of the day. It is worth noting that no planned events, not even minor ones, were scheduled for Monday, let alone important ones. Therefore, traders had nothing to react to, and later this week, a series of important events will take place, so it is necessary to conserve energy and not risk unnecessarily. From a technical point of view, the pair continues to correct after a month-long decline, with the CCI indicator entering oversold territory. The correction could be stronger, again fully corresponding to the overall technical picture. We haven’t said this for long, but now the EUR/USD pair trades are completely justified and logical. We can only hope that it will continue like this.
As mentioned earlier, there will be several important events this week. In particular, today, the report on US inflation will be published. At this point, it is difficult to say whether its value will be considered by the Federal Reserve’s monetary committee, which will already be holding a meeting at that time. The decision on the interest rate has already been made. No matter what anyone says, we do not believe the decision is made on the meeting day.
Usually, several weeks before the meeting, it becomes clear what decision will ultimately be made. For example, we initially started receiving “hawkish” information from Fed officials. But later, it shifted to “moderate.” As a result, according to the FedWatch tool, the probability of tightening monetary policy in June is minimal, and a whole group of Fed officials supports raising the rate once every two meetings. Therefore, according to popular opinion, the rate will remain unchanged on Wednesday, and in July, it will increase by 0.25% again. From our point of view, this will be an “additional increase” that the market did not initially expect. Therefore, the dollar should continue to experience optimism. The same goes for the euro. With the pound, everything is turned upside down.
ECB and Fed meetings may not affect market sentiment
We should also remember that the ECB meeting will take place this week. However, it is currently very difficult to expect anything extraordinary from it. The interest rate will increase by 0.25% with a probability of 99%, which the market has long anticipated, as this decision has been known for several months. Thus, the ECB’s rate plan remains unchanged: two more increases of 0.25%, and that’s it. Several factors support this scenario.
First, after reducing the pace of tightening to a minimum, there is expected to be a maximum of three increases; otherwise, the purpose of slowing down is lost. If inflation is high and tends to rise, why slow down the pace of tightening if you intend to complete only part of the cycle? Second, during the mortgage crisis of 2007-2008, the ECB raised its rate below the Federal Reserve and the Bank of England. Third, the ECB is forced to consider the interests of 27 countries, so it physically cannot afford any tightening of monetary policy that would put pressure on weak economies. In contrast, economies with low inflation will fall into deflation. The ECB has to balance the interests of all countries, which means an average peak rate. Therefore, the level of 4.25% seems the most realistic. And, as mentioned before, the market has already factored it in.
Therefore, there are no grounds for the euro to rise. It needs to pray that the economy of the Eurozone does not slide into a recession because its growth has been practically zero for two consecutive quarters. The dollar has many more advantages: a higher rate, a stronger economy, additional tightening, and a strong oversold condition. Therefore, we expect the pair to resume its decline in the medium term.
The average volatility of the euro/dollar currency pair over the past five trading days as of June 13 is 68 pips and is characterized as “average.” Thus, we expect the pair to move between the levels of 1.0686 and 1.0822 on Tuesday. A reversal of the Heiken Ashi indicator back down will indicate a possible resumption of the downward movement.
Nearest support levels:
S1 – 1.0742
S2 – 1.0681
S3 – 1.0620
Nearest resistance levels:
R1 – 1.0803
R2 – 1.0864
R3 – 1.0925
Trading recommendations:
The EUR/USD pair stays above the moving average line, but its presence in this area may be short-lived. Currently, long positions should be considered with targets at 1.0803 and 1.0822 as long as the price remains above the moving average. Short positions will become relevant only after the price moves below the moving average line, with targets at 1.0686 and 1.0681.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both channels are directed in the same direction, it indicates a strong trend.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – probable price channel within which the pair will move in the next 24 hours, based on current volatility indicators.
CCI indicator – its entry into the oversold area (below -250) or overbought area (above +250) indicates an approaching trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
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